Exhibit 10.40
INVESTMENT AND ROYALTY AGREEMENT
This Investment and Royalty Agreement (this "Agreement") is made as of March 5,
2003, by and between Columbia Laboratories, Inc., a Delaware corporation
("Columbia"), and PharmaBio Development Inc., a North Carolina corporation
("PharmaBio"). Columbia and PharmaBio may each be referred to herein
individually as a "Party" and collectively as the "Parties."
Background and Overview
Columbia has requested and PharmaBio is willing to provide certain funds to
Columbia, subject to and upon the terms and conditions below.
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties agree as follows:
ARTICLE I
Definitions
1.1 "Adverse Marketing Event" shall mean the occurrence after the Product
Launch Date of any of the following: (i) Columbia or its licensees shall
withdraw, or be required by the FDA or other Governmental Authority to
withdraw, the Product from the market in the Territory for any reason for a
period that is greater than [***] days and that is, or is reasonably
expected to be, not greater than [***] days; or (ii) Columbia or its
licensees shall fail to have a supply of the Product, consistent with past
quantities and practices, or shall fail to supply Product, in response to
orders thereof, for a period of time that is, or is reasonably expected to
be, greater than [***] days.
1.2 "Affiliate" shall mean, as to any person or entity, any corporation or
business entity controlled by, controlling, or under common control with
such person or entity. For this purpose, "control" shall mean direct or
indirect beneficial ownership of at least fifty percent (50%) of the voting
stock or income interest in such corporation or other business entity, or
such other relationship as, in fact, constitutes actual control.
1.3 "Annual Period" shall mean a twelve-month period beginning on the first day
of the month following the Product Launch Date and each anniversary
thereof, subject to extension as described in Section 2.5, except the first
Annual Period shall also include the period from the Product Launch Date to
the first day of the month following the Product Launch Date.
1.4 "Approvable Letter" shall mean a letter from the FDA pursuant to 21 CFR
314.110 with respect to the NDA for the Product with labeling substantially
similar to the labeling requested by Columbia in the NDA as in effect on
the date hereof.
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1.5 "Approval Letter" shall mean a letter from the FDA pursuant to 21 CFR
314.105 with respect to the NDA for the Product with labeling substantially
similar to the labeling requested by Columbia in the NDA as in effect on
the date hereof.
1.6 "Business Day" shall mean any day other than a Saturday, Sunday or legal
holiday on which banks in North Carolina and New York are open for the
conduct of their banking business.
1.7 "Columbia SEC Reports" shall have the meaning specified in Section 3.3
herein.
1.8 "Commission" means the United States Securities and Exchange Commission.
1.9 "Debt" shall mean (i) indebtedness for borrowed money, (ii) obligations
evidenced by bonds, debentures, notes or other similar instruments, (iii)
obligations to pay the deferred purchase price of property or services,
(iv) obligations as lessee under leases which shall have been or should be,
in accordance with generally accepted accounting principles, recorded as
capital leases, and (v) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds referred to
in clauses (i) through (iv) above. For the avoidance of doubt, Debt shall
not include day-to-day obligations and payables incurred by Columbia in the
ordinary course of business.
1.10 "Exchange Act" means the Securities Exchange Act of 1934, as from time to
time amended, and the rules and regulations of the Commission promulgated
thereunder.
1.11 "Existing Royalty Agreement" shall mean the Investment and Royalty
Agreement between the Parties dated July 31, 2002 (regarding Advantage-S,
Crinone, Prochieve and RepHresh).
1.12 "Event of Default" shall have the meaning set forth in Section 2.1.
1.13 "FDA" shall mean the United States Food and Drug Administration.
1.14 "GAAP" shall mean generally accepted accounting principles.
1.15 "Governmental Authority" means any foreign, Federal, state or local court
or governmental or regulatory agency or authority.
1.16 "Innovex" shall mean Innovex LP, a New Jersey limited partnership, whose
address is 10 Waterview Boulevard, Parsippany, NJ 07054, which is an
Affiliate of PharmaBio.
1.17 "Law" means any United States Federal, state, local or foreign law,
statute, rule, regulation, order, writ, injunction, judgment or decree of
any Governmental Authority.
1.18 "Lien" shall mean any lien, security interest, mortgage, pledge,
encumbrance, charge or claim.
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1.19 "Market Withdrawal" shall mean the occurrence after the Product Launch Date
of any of the following: (i) Columbia or its licensees shall withdraw, or
be required by the FDA or other Governmental Authority to withdraw, the
Product from the market in the Territory for any reason for a period that
is, or is reasonably expected to be, greater than [***] days; or (ii)
Columbia or its licensees shall fail to have a supply of the Product,
consistent with past quantities and practices, for a period of time that
is, or is reasonably expected to be, greater than [***] days.
1.20 "Master Services Agreement" shall mean the agreement dated July 31, 2002,
between Columbia and Innovex, together with the Sales Force Work Order
dated as of the date hereof under such agreement, pursuant to which Innovex
agrees to provide contract sales services to Columbia, as well as any the
work orders thereunder relating to the Product.
1.21 "Material Adverse Effect" shall mean a material adverse effect on the
business, operations, properties or financial condition of Columbia and its
Subsidiaries, taken as a whole, or a material adverse effect on the
manufacture, marketing, distribution or sale of the Product in the
Territory, taken as a whole; provided, however, that the following shall be
excluded from any determination as to whether a Material Adverse Effect has
occurred: (i) any effect resulting from or arising in connection with this
Agreement or the transactions contemplated thereby, (ii) the effects of
changes or conditions generally affecting the pharmaceutical industry, and
(iii) changes in general economic, financial market, regulatory or
political conditions.
1.22 "Minimum Sales Force Level" shall mean a Columbia sales force size of not
less than [***] full-time Columbia sales representatives promoting the
Product in the first detailing position, provided that any open sales
territory for which Columbia or Innovex is actively recruiting a sales
representative shall be counted as a Columbia sales representative for
purposes of this definition.
1.23 "NDA" shall mean a "new drug application" as such term is used under the
United States Federal Food, Drug and Cosmetic Act, as amended from time to
time, and all regulations promulgated thereunder.
1.24 "Net Sales" shall mean the gross amount billed or invoiced by Columbia or
an Affiliate or any licensee or sublicensee (or other transferee), or on
behalf of or for the benefit of Columbia or an Affiliate or any licensee or
sublicensee (or other transferee), for sales of the Product, to a third
party in the Territory, less the following items, but only to the extent
such items are included in such gross amount and without duplication:
(i) discounts, including cash and quantity discounts, charge-back
payments, refunds and rebates granted to managed health care
organizations or similar organizations or to federal, state and
local governments (including, without limitation, Medicaid
rebates), their agencies, and purchasers and reimbursers or to
trade customers, including but not limited to, wholesalers and
chain and pharmacy buying groups;
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(ii) actual credits or allowances resulting from customer claims,
damaged goods, rejections or returns of the Product, including
recalls, regardless of the party requesting such;
(iii) freight, postage, shipping and insurance charges actually
allowed or paid for delivery of the Product, to the extent
billed;
(iv) taxes, duties or other governmental charges levied on, absorbed
or otherwise imposed on sale of the Product, including without
limitation value-added taxes, or other governmental charges
otherwise measured by the billing, when included in billing, as
adjusted for rebates, charge-backs and refunds, but not including
income or similar taxes; and
(v) actual write-offs of uncollectible customer accounts for recorded
sales, provided that (x) any subsequent collection of such
uncollectible accounts shall be restored as Net Sales at the time
of collection and (y) Columbia shall follow commercially
reasonable practices of collecting and otherwise administering
such accounts.
1.25 "Not Approvable Letter" shall mean a letter from the FDA pursuant to 21 CFR
314.120 with respect to the NDA for the Product.
1.26 "Product" shall mean (i) the controlled and sustained release bioadhesive
buccal product containing testosterone for which Columbia has filed NDA #
21-543, and which Columbia plans to market in the Territory under the
trademark Striant, and shall also include such product in any and all
dosages or strengths and for any and all indications in men and any and all
"off-label" uses and (ii) any other controlled and sustained release
bioadhesive buccal product with testosterone as the active ingredient
either alone or in combination with another active ingredient in any and
all dosages or strengths and for any and all indications in men and any and
all "off-label" uses. For the avoidance of doubt, sales of the Product for
"off-label" uses by women shall be included in Net Sales.
1.27 "Product Launch Date" shall mean the first date that commercial quantities
of the Product are sold in the Territory.
1.28 "Royalty Term" shall mean the seven (7) consecutive Annual Periods
beginning on the Product Launch Date.
1.29 "Securities Act" means the Securities Act of 1933, as from time to time
amended, and the rules and regulations of the Commission promulgated
thereunder.
1.30 "Subsidiary" and "Subsidiaries" shall have the respective meanings
specified in Section 3.5.
1.31 "Territory" shall mean the United States of America and all states thereof,
the District of Columbia, and Puerto Rico.
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1.32 "Transaction Agreements" shall mean, collectively, this Agreement and the
Master Services Agreement.
1.33 "Transactions" shall mean, collectively, the transactions contemplated by
the Transaction Documents.
1.34 "Warburg Note" shall mean that certain 7 1/8% Convertible Subordinated Note
(No. R-1 $10,000,000) issued by Columbia to SBC Warburg Dillon Read Inc.
dated March 16, 1998 (including any refinancing, replacement, substitution
or restatement of such Note).
ARTICLE II
Investment and Royalties; Related Agreements
2.1 PharmaBio will make the following payments to Columbia:
Quarterly Payment Date Amount
---------------------- ----------
March 7, 2003 $3,000,000
June 1, 2003 $3,000,000
September 1, 2003 $3,000,000
December 1, 2003 $3,000,000
March 1, 2004 $3,000,000
Notwithstanding the foregoing, if on or before a Quarterly Payment Date set
forth above, (i) Columbia has received a Not Approvable Letter, or (ii)
PharmaBio has made payments under this Section 2.1 of at least [***] and
Columbia has not received an Approval Letter, then PharmaBio may, in its
sole discretion, suspend making any additional payments under this Section
2.1 until such time as Columbia receives an Approval Letter. If PharmaBio
suspends one or more quarterly payments under the preceding sentence and
Columbia subsequently receives an Approval Letter, promptly thereafter (and
in any case within [***] PharmaBio shall pay Columbia any quarterly
payments that PharmaBio had suspended. If PharmaBio suspends one or more
payments under this Section 2.1 and Columbia has not received an Approval
Letter, but Columbia has received an Approvable Letter, then PharmaBio
agrees to discuss in good faith with Columbia mutually acceptable
arrangements under which PharmaBio could continue payments or a portion
thereof under this Section 2.1, prior to receipt of an Approval Letter.
Notwithstanding the foregoing, upon the occurrence of an Event of Default,
PharmaBio may at any time, if an Event of Default shall then be continuing,
by written notice to Columbia, terminate all of its future funding
obligations under this Section 2.1, so long as Innovex is not in default in
any material respect of its performance of its material
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obligations under the Master Services Agreement and the work orders
thereunder relating to the Product.
"Event of Default" shall mean and include each of the following:
(a) Columbia shall fail to pay any royalties to PharmaBio when the same
become due and payable to PharmaBio and [***] Business Days have
elapsed following receipt of written notice of such non-payment from
PharmaBio to Columbia;
(b) Any material representation or warranty made by Columbia under this
Agreement shall prove to have been untrue or incorrect in any material
respect when made;
(c) Columbia shall fail to perform or comply with any material agreement
or covenant made by Columbia under this Agreement in any material
respect;
(d) Columbia shall sell, assign, license, lease or otherwise transfer all
or substantially all of its assets or properties owned (or otherwise
held by it) relating to the Product, in one or a series of related
transactions, without the prior written consent of PharmaBio;
(e) A Market Withdrawal shall occur;
(f) Columbia shall not have received an Approval Letter for the Product
from the FDA by [***];
(g) Columbia shall receive a Not Approvable Letter, and does not receive
an Approval Letter for the Product within 6 months thereafter;
(h) Columbia shall (i) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect), (ii) file a petition
seeking to take advantage of any other Laws relating to bankruptcy,
insolvency, reorganization, winding up or composition for adjustment
of debts, (iii) consent to or fail to contest in a timely and
appropriate manner any petition filed against it in an involuntary
case under such bankruptcy laws or other Laws, (iv) apply for or
consent to, or fail to contest in a timely and appropriate manner, the
appointment of, or the taking of possession by, a receiver, custodian,
trustee, or liquidator of itself or of a substantial part of its
property, (v) admit in writing its inability to pay its debts as they
become due, (vi) make a general assignment for the benefit of
creditors, or (vii) take any corporate action for the purpose of
authorizing any of the foregoing;
(i) A case or other proceeding shall be commenced against Columbia in any
court of competent jurisdiction seeking (i) relief under the federal
bankruptcy laws (as now or hereafter in effect) or under any other
Laws relating to bankruptcy, insolvency, reorganization, winding up or
adjustment of debts, or (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like for Columbia or any of its
subsidiaries or for all or any substantial part of their respective
assets, and such case or proceeding shall continue without dismissal
or stay for a period
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of sixty (60) consecutive days, or an order granting the relief
requested in such case or proceeding (including, but not limited to,
an order for relief under such federal bankruptcy laws) shall be
entered; or
(j) Any indebtedness of Columbia or any of its subsidiaries in excess of
$[***] shall be declared to be due and payable, or required to be
prepaid, prior to the stated maturity thereof, and Columbia shall fail
to pay the same within [***] days of such declaration.
The Parties agree that an Event of Default under the terms of this
Agreement shall constitute an Event of Default under the Existing Royalty
Agreement. If an Event of Default occurs under Section 2.1(a) of the
Existing Royalty Agreement because of Columbia's failure to pay royalties
when due, PharmaBio may, in its sole discretion, suspend making any
additional payments under Section 2.1 of this Agreement until such time as
the Event of Default under Section 2.1(a) of the Existing Royalty Agreement
no longer is continuing.
2.2 In the event that (i) PharmaBio terminates all of its future funding
obligations under Section 2.1 upon an Event of Default, or (ii) Columbia
terminates this Agreement under Section 8.1, then Columbia shall pay to
PharmaBio the aggregate amount (the "Repayment Amount") by which the
aggregate amount of payments by PharmaBio under this Agreement (the
"Aggregate Payments") exceeds the aggregate amount of royalties, if any,
paid by Columbia to PharmaBio under this Agreement, plus accrued interest,
in full satisfaction of Columbia's obligations under this Agreement. For
purposes of this calculation, interest shall (i) accrue on the Aggregate
Payments at a rate equal to the greater of [***] or the Prime Rate as
announced from time to time by Wachovia Bank, N.A. (or its successor) plus
[***] and (ii) accrue from the date of the payment of funds by PharmaBio to
Columbia until the Repayment Amount is paid by Columbia. The Repayment
Amount shall be immediately due and payable in full, except that in the
case of an Event of Default described in Sections 2.1(b), 2.1(c), 2.1(e),
2.1(f) and 2.1(g), the Repayment Amount shall be paid over [***] years in
[***] equal monthly installments beginning thirty (30) days after
PharmaBio's termination of its funding obligations or Columbia's
termination of the Agreement, as the case may be. PharmaBio shall have no
obligation to terminate its funding obligations upon an Event of Default
and in lieu thereof may exercise its remedies under the other provisions of
this Agreement. In the event that the Repayment Amount becomes due and
payable pursuant to this Section 2.2, Columbia acknowledges and agrees that
the Repayment Amount shall constitute indebtedness of Columbia payable to
the order of PharmaBio.
2.3 In consideration of PharmaBio's funding commitments set forth in Section
2.1, with respect to each Annual Period of the Royalty Term, Columbia shall
pay PharmaBio royalties equal to nine percent (9%) of Net Sales during an
Annual Period up to the Net Sales Baseline applicable to such Annual Period
as set forth in the table below and royalties equal to four and one-half
percent (4 1/2 %) of Net Sales during an Annual Period in excess of such
Net Sales Baseline.
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Annual Period Net Sales Baseline
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1 [***]
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2 [***]
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3 [***]
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4 [***]
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5 [***]
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6 [***]
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7 [***]
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Notwithstanding anything to the contrary contained in this Agreement, the
total royalties payable to PharmaBio under this Section 2.3 shall not (i)
exceed in the aggregate for all Annual Periods the amount of $55,000,000
(the "Maximum Royalty Amount"), or (ii) be less than $30,000,000 in the
aggregate for all Annual Periods (the "Minimum Royalty Amount"). With
respect to the Minimum Royalty Amount: if by the end of the third Annual
Period without regard to extension of any Annual Period under Section 2.5,
PharmaBio has not received at least $[***] in aggregate royalties under
this Section 2.3 (with respect to Net Sales for the first three Annual
Periods without regard to extension of any Annual Period under Section
2.5), then Columbia will pay PharmaBio the difference between the amount of
royalties actually received and $[***]; and at the end of the seventh (7th)
Annual Period, if PharmaBio has not received at least $30,000,000 in
aggregate royalties under this Section 2.3, then Columbia will pay
PharmaBio the difference between the amount of royalties actually received
and $30,000,000, provided that the time for payments under this sentence
shall be extended by the period of any extension of the Royalty Term under
Section 2.5, provided further that in no event shall such extension for
payments under this sentence be extended more than six (6) months beyond
the original due date. The Minimum Royalty Amount shall be payable by
Columbia to PharmaBio notwithstanding the actual sales of the Product or
other Product-related events, including without limitation any Adverse
Marketing Event or Market Withdrawal.
Notwithstanding the foregoing provisions of this Section 2.3 and provided
Columbia has made all royalty payments with respect to all Annual Periods
through the applicable "Calculation Date" in the table below, if, on the
applicable Calculation Date, the aggregate royalties paid to PharmaBio for
all Annual Periods, through and including the Annual Period that includes
the Calculation Date, equals or exceeds the applicable Termination Amount
in the table below, the obligation of Columbia to pay royalties to
PharmaBio under this Section 2.3 with respect to Annual Periods after the
Calculation Date shall terminate.
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Calculation Date Termination Amount
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End of the Third Annual Period [***]
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End of the Fourth Annual Period [***]
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End of the Fifth Annual Period [***]
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End of the Sixth Annual Period [***]
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The royalty payments under this Section 2.3 shall be paid by Columbia on a
quarterly basis as soon as reasonably practicable following the end of each
calendar quarter (but not later than forty five (45) days following the end
of each calendar quarter, except following the fourth calendar quarter, in
which case Columbia shall have up to 60 days) during the seven (7) Annual
Periods in the Royalty Term. Accompanying each of Columbia's payments to
PharmaBio under this Section, Columbia will provide to PharmaBio a report
showing the applicable Net Sales and the calculation of the resulting
royalty payment. Columbia also shall provide PharmaBio with all sales data
for the Product that are available to Columbia.
2.4 As further consideration for PharmaBio's funding commitments set forth in
Section 2.1, Columbia shall reimburse PharmaBio for the fees and expenses
of its outside legal counsel as counsel for Quintiles in connection with
the negotiation, execution, and closing of this Agreement and the
consummation of the transactions contemplated thereby, which attorneys'
fees and expenses shall be offset by PharmaBio against the initial payment
amount otherwise due to Columbia under Section 2.1.
2.5 Columbia shall use its commercially reasonable efforts to commercialize the
Product in the Territory. Without limiting the foregoing, Columbia will
provide a sales force of an average size, calculated on a quarterly basis,
not less than the Minimum Sales Force Level during the Royalty Term. If, at
any time during such period, (a) Columbia reduces the Product's average
sales force below the Minimum Sales Force Level for a period of more than
[***] days and Innovex is not in default in any material respect of its
performance of its material obligations under the Master Services Agreement
and the work orders thereunder relating to the Product, (b) an Adverse
Marketing Event shall occur, or (c) a Market Withdrawal shall occur, then
Columbia and PharmaBio will negotiate in good faith to restructure
PharmaBio's commitments under Section 2.1 and the corresponding royalty
amounts under Section 2.3, which negotiations will take into account the
implications of the reduced sales force size or Adverse Marketing Event or
Market Withdrawal, as the case may be, on future sales of the Product. If
the Parties are unable to agree to such restructuring within [***] days
after PharmaBio gives written notice to Columbia of its intent to pursue a
remedy under this Section 2.5, then, provided Innovex is not in default in
any material respect of its performance of its material obligations under
the Master Services Agreement and the work orders thereunder relating to
the Product, PharmaBio may, at its sole discretion by written notice to
Columbia, elect to (i) suspend all future funding obligations under Section
2.1; and (ii) extend the Royalty Term (including, without limitation, the
then-current Annual Period). During the suspension and extension period,
PharmaBio shall continue to receive royalties at the rate equal to the
royalty amount applicable immediately prior to the effective date of such
suspension and extension. If PharmaBio elects this remedy, the then-current
Annual Period for royalty payments under Section 2.3, and the funding
commitments under Section 2.1, shall be extended until the Minimum Sales
Force Level is satisfied or the
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Adverse Marketing Event no longer exists or the Market Withdrawal no longer
exists, as the case may be. The funding commitments under Section 2.1 shall
resume as soon as Columbia achieves the Minimum Sales Force Level or the
Adverse Marketing Event no longer exists or the Market Withdrawal no longer
exists, as the case may be, and the end of the then current Annual Period
shall be extended for the amount of such suspension and extension period,
such that PharmaBio enjoys the full length of the seven (7) Annual Periods
described in Section 2.3 with the benefit of the Minimum Sales Force Level
or absence of the Adverse Marketing Event or absence of the Market
Withdrawal, as the case may be, for seven (7) full twelve-month periods,
and the term "Royalty Term" shall, for all purposes under this Agreement,
be extended accordingly.
2.6 Each Party hereto shall keep or cause to be kept such records as are
required to determine, in a manner consistent with GAAP, the sums or
credits due under this Agreement. Each Party shall have the right, at such
Party's expense, through a certified public accountant or like person
reasonably acceptable to the other Party, upon execution of a customary
confidentiality agreement, to examine such records during regular business
hours upon reasonable notice during the term of this Agreement and for
twelve (12) months after its termination; provided however, that (i) such
examination shall not take place more than once a year and shall not cover
such records for more than the preceding Annual Period, and (ii) such
accountant shall report to both Parties only as to the accuracy of the
reports or payments provided or made by the other Party under this
Agreement. Any adjustments required as a result of overpayments or
underpayments identified through a Party's exercise of examination rights,
and any other adjustments that may be required from time to time in order
to correct overpayments or underpayments under this Agreement, shall be
made by subtracting or adding, as appropriate, amounts from or to the next
royalty payment in accordance with Section 2.3. The Party requesting the
examination shall bear the full cost of the examination unless such
examination correctly discloses that the discrepancy for the Annual Period
differs by more than five (5) percent from the amount the accountant
determines is correct, in such case the owing Party shall pay the
reasonable fees and expenses charged by the accountant. In the event that a
Party disputes an invoice or other payment obligation under this Agreement,
such Party shall timely pay the amount of the invoice or other payment
obligation, and the Parties shall resolve such dispute in accordance with
Article XIII.
2.7 Without the prior written approval of PharmaBio, Columbia shall not, nor
shall it allow any Affiliate or third party acting on behalf of or for the
benefit of Columbia or any Affiliate to, commercialize or promote a product
that could reasonably be expected to compete with the Product in the
Territory during the Royalty Term.
2.8 The Chief Financial Officers ("CFOs") of Columbia and PharmaBio shall
coordinate the activities of the Parties under this Agreement. The CFOs
shall meet or communicate (in person or by telephone conference) on a
regular basis as may be reasonably requested by either of them, but no less
frequently than semi-annually about the performance of the Parties under
this Agreement. The Parties acknowledge that a Steering Committee will be
established as described in the Master Services Agreement. The Parties
agree that, in addition to the activities described in the Master Services
Agreement, the Steering
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Committee will coordinate and facilitate the overall commercialization
relationship among PharmaBio and its Affiliates and Columbia and its
Affiliates, including with respect to this Agreement.
2.9 Columbia agrees not to sell, assign, license, lease or otherwise transfer
all or any substantial portion of its assets or properties owned (or
otherwise held) relating to the Product in one or a series of related
transactions, without the prior written consent of PharmaBio, which consent
shall not be unreasonably withheld or delayed.
2.10 Without the prior written consent of PharmaBio, which consent shall not be
unreasonably withheld or delayed, Columbia shall not create or incur or
allow to be created, incurred or exist any Debt, except Debt which is
junior and subordinate in right of payment to the Minimum Royalty Amount
and the Repayment Amount (such Debt being referred to herein as "Junior
Debt"), so long as prior to the creation of such Junior Debt the holder
thereof has agreed to subordination terms and conditions in form and
substance reasonably satisfactory to PharmaBio providing for the
subordination of the Junior Debt to the Minimum Royalty Amount and the
Repayment Amount. Columbia and PharmaBio agree that Columbia's payment
obligations under this Agreement, including the Minimum Royalty Amount and
the Repayment Amount, shall be and constitute "Senior Indebtedness" as such
term is used in the Warburg Note.
2.11 Without the prior written consent of PharmaBio, which consent shall not be
unreasonably withheld or delayed, Columbia shall not create or incur or
allow to be created, incurred or exist any Lien upon or with respect to any
of Columbia's assets or properties, except Liens securing Debt or other
obligations which are junior and subordinate in right of payment to the
Minimum Royalty Amount and the Repayment Amount (such Liens being referred
to herein as "Junior Liens"), so long as prior to the creation of such
Junior Liens the holder thereof has agreed to subordination terms and
conditions in form and substance reasonably satisfactory to PharmaBio
providing for the subordination of the Junior Liens to the Minimum Royalty
Amount and the Repayment Amount.
2.12 Columbia shall have sole responsibility for all FDA and regulatory related
obligations regarding the Product. Columbia shall also have responsibility
for manufacturing, distribution and marketing of the Product, except as set
forth in the Master Services Agreement.
ARTICLE III
Representations and Warranties of Columbia
Columbia hereby represents and warrants to PharmaBio as of the date hereof
as follows:
3.1 Organization and Qualification. Columbia is a corporation duly organized,
validly existing and in good standing under the Laws of the State of
Delaware, and Columbia is qualified to do business as a foreign corporation
in each jurisdiction in which such qualification is required, except where
failure to so qualify would not have a Material Adverse Effect. Columbia
has all requisite corporate power and authority to own, lease
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and operate its properties and to carry on its businesses as now conducted
and as proposed to be conducted.
3.2 Authority and Consents. Columbia has all necessary corporate power and
authority to execute and deliver the Transaction Agreements and to
consummate the Transactions. The execution and delivery of the Transaction
Agreements and consummation of the Transactions have been duly authorized
by all necessary corporate action on the part of Columbia and no other
corporate proceedings on the part of Columbia are necessary to authorize
the Transaction Agreements or to consummate the Transactions. The
Transaction Agreements have been duly and validly executed and delivered by
Columbia and constitute valid, legal and binding agreements of Columbia,
enforceable against Columbia in accordance with their respective terms. No
consent, authorization or order of, or filing or registration with, any
Governmental Authority is required to be obtained or made by Columbia for
the execution, delivery and performance of the Transaction Agreements or
the consummation of the Transactions. Neither the execution, delivery and
performance of the Transaction Agreements by Columbia nor the consummation
by Columbia of the Transactions will (i) conflict with or result in any
breach of any provision of the certificate of incorporation or bylaws of
Columbia; (ii) violate any Law applicable to Columbia or any of its
Subsidiaries or the Transactions; or (iii) result in the creation of any
Lien upon any assets of Columbia or any of its Subsidiaries pursuant to the
terms or provisions of, or will not conflict with, result in the breach or
violation of, or constitute, either by itself or upon notice or the passage
of time or both, a default under any agreement, mortgage, deed of trust,
lease, franchise, license, indenture, permit or other instrument to which
Columbia or any of its Subsidiaries is a party or by which Columbia or any
of its Subsidiaries or any of their respective properties may be bound,
except in the case of clauses (ii) and (iii) for such violation, Lien or
default which would not, individually or in the aggregate, have and which
could not reasonably be expected to have a Material Adverse Effect.
3.3 Columbia SEC Reports; Financial Statements. Columbia has made available to
PharmaBio (i) Columbia's Annual Reports on Form 10-K for each of the fiscal
years ended December 31, 2000 and December 31, 2001; (ii) all definitive
proxy statements relating to Columbia's meetings of stockholders (whether
annual or special) held since January 1, 2001; and (iii) all other reports
or registration statements filed by Columbia with the Commission since
January 1, 2001 (all such filings at (i) through (iii), collectively, the
"Columbia SEC Reports"). As of their respective filing dates, the Columbia
SEC Reports were prepared in all material respects in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be,
applicable to the Columbia SEC Reports. None of such forms, reports or
registration statements contained, when filed, any untrue statement of a
material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of Columbia
included in the Columbia SEC Reports complied as to form in all material
respects with applicable accounting requirements and the published rules
and regulations of the Commission with respect thereto when the same were
filed and fairly presented, in conformity with GAAP
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applied on a consistent basis (except as may be indicated in the notes
thereto), the consolidated financial position of Columbia and its
consolidated Subsidiaries as of the dates thereof and their consolidated
results of operations and changes in financial position for the periods
then ended (subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments). Columbia has filed with the
Commission on a timely basis, or received a valid extension of such time of
filing, all forms, reports and documents required to be filed by it under
the Exchange Act since January 2, 2001.
3.4 Absence of Undisclosed Liabilities. Except as and to the extent
specifically reflected or reserved against on the consolidated balance
sheets of Columbia as of December 31, 2001, included in Columbia's Annual
Report on Form 10-K for the fiscal year ended December 31, 2001, or
otherwise disclosed in the Columbia SEC Reports, neither Columbia nor any
of its Subsidiaries have any material debts, liabilities or obligations of
any nature, whether accrued, absolute, contingent or otherwise, and whether
due or to become due, arising out of transactions entered into, or any
state of facts existing on or prior to the date of this Agreement that
would be required under GAAP to be reported on the balance sheet of
Columbia, other than liabilities and obligations (1) arising in the
ordinary course of business after December 31, 2001, which do not have a
Material Adverse Effect, or (2) arising in connection with the
Transactions, which do not have a Material Adverse Effect.
3.5 Subsidiaries. Schedule 3.5 attached hereto sets forth each subsidiary of
Columbia as of the date hereof (each a "Subsidiary" and together its
"Subsidiaries"), showing the jurisdiction of its incorporation or
organization and showing the percentage of each person's ownership of the
outstanding stock or other interests of such Subsidiary. Each Subsidiary is
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation and is qualified to do business as a foreign
corporation in each jurisdiction in which qualification is required, except
where failure to so qualify would not have a Material Adverse Effect. Each
Subsidiary has all requisite corporate power and authority to carry on its
business as now conducted.
3.6 Absence of Changes. Except as disclosed by Columbia in the Columbia SEC
Reports, since December 31, 2001, (a) Columbia and its Subsidiaries have
not incurred any liabilities or obligations (indirect or contingent) or
entered into any written or oral agreements or other transactions which are
outside of the ordinary course of business which have had or which would
reasonably be expected to have, and there have been no changes in the
business or operations of Columbia or any of the Subsidiaries which have
had or which would reasonably be expected to have, a Material Adverse
Effect; (b) Columbia and its Subsidiaries have not sustained any material
loss or interference with their respective businesses or properties from
fire, flood, windstorm, accident or other calamity not covered by
insurance; and (c) Columbia has not paid or declared any dividends or other
distributions with respect to its common stock and Columbia is not in
default in the payment of principal or interest on any outstanding debt
obligations.
3.7 No Defaults. Except as to defaults, violations and breaches which
individually or in the aggregate would not have a Material Adverse Effect
on Columbia, neither Columbia nor
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any of its Subsidiaries is in violation or default of any provision of its
certificate of incorporation or bylaws, or other organizational documents,
or in breach of or default with respect to any provision of any agreement,
judgment, decree, order, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument to which it is a party or by
which it or any of its properties are bound; and there does not exist any
state of fact which, with notice or lapse of time or both, would constitute
an event of default or default on the part of Columbia or any Subsidiary as
defined in such documents or instruments, except such defaults which
individually or in the aggregate would not have a Material Adverse Effect
on Columbia.
3.8 Material Agreements.
(a) Except as included or incorporated by reference in, or otherwise
referred to in, the Columbia SEC Reports, or listed on Schedule 3.8(a),
neither Columbia nor any of its Subsidiaries is a party to any written or
oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, a copy of which would be required to be filed with the
Commission as an exhibit to a registration statement on Form S-1
(collectively, "Material Agreements") if Columbia was registering
securities under the Securities Act. The Material Agreements are in full
force and effect and Columbia or its Subsidiary, as the case may be, has in
all material respects performed all the obligations required to be
performed by it to date under such agreements, has received no notice of
default and, to the best of Columbia's knowledge, neither Columbia nor any
of its Subsidiaries nor any party obligated to Columbia or to any
Subsidiary is in default under any Material Agreement now in effect, the
result of which could reasonably be expected to cause a Material Adverse
Effect. All Material Agreements constitute valid and binding obligations of
Columbia or one or more of its Subsidiaries, as the case may be,
enforceable against Columbia or such Subsidiaries in accordance with their
respective terms.
(b) Schedule 3.8(b) sets forth each of the material contracts related to
the Product. Each of the contracts set forth on Schedule 3.8(b) is in full
force and effect and Columbia and its Affiliates have in all material
respects performed all their respective obligations required to be
performed by them to date under such agreements, have received no notice of
default and, to the best of Columbia's knowledge, neither Columbia nor its
Affiliates nor any party obligated to Columbia is in default under such
agreements, the result of which could reasonably be expected to cause a
Material Adverse Effect on Columbia.
3.9 No Litigation or Other Actions. There are no legal or governmental actions,
suits, proceedings or investigations pending or, to Columbia's knowledge,
threatened to which Columbia or any of its Subsidiaries is or may be a
party or of which property owned, licensed or leased by Columbia or any of
its Subsidiaries is or may be the subject, which actions, suits,
proceedings or investigations, individually or in the aggregate, might
prevent or might reasonably be expected to have a material adverse affect
on the Transactions or result in a Material Adverse Effect; and no labor
disturbance by the employees of Columbia or any of its Subsidiaries exists
or, to Columbia's knowledge, is imminent which might reasonably be expected
to have a Material Adverse Effect, except
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as provided on Schedule 3.11. Neither Columbia nor any of its Subsidiaries
is a party to or subject to the provisions of any material injunction,
judgment, decree or order of any court, regulatory body administrative
agency or other governmental body.
3.10 Properties (Other than Intellectual Property). Columbia and each of the
Subsidiaries have valid title to all the properties and assets reflected as
owned by such entities in the Columbia SEC Reports, subject to no lien,
mortgage, pledge, charge or encumbrance of any kind except (i) those, if
any, reflected in the Columbia SEC Reports, (ii) those which are not
material in amount and do not adversely affect the use made and proposed to
be made of such property by Columbia or its Subsidiaries, or (iii) those on
Schedule 3.11. Columbia and each Subsidiary holds its leased properties
under valid and binding leases. Columbia and each Subsidiary owns, leases
or licenses all such properties necessary for the conduct of its respective
business (as described in the Columbia SEC Reports).
3.11 Intellectual Property. Set forth on Schedule 3.11 are all of the patents,
patent applications, trademark applications, and trademark registrations in
the Territory used or held for use to develop, commercialize, market, make
and distribute the Product. Columbia and each of its Subsidiaries owns or
has valid and enforceable rights to use all Intellectual Property (as
defined below) necessary to conduct their respective businesses as
described in the Columbia SEC Reports including without limitation the
Intellectual Property described on Schedule 3.11 and any other Intellectual
Property used or held for use to develop, commercialize, market, make and
distribute the Product in the Territory (collectively, the "Columbia
Intellectual Property"). To the knowledge of Columbia, none of the Columbia
Intellectual Property infringes, misappropriates or makes any unauthorized
use of any Intellectual Property of any other person, except as provided on
Schedule 3.11. Neither Columbia nor any of its Subsidiaries has received
notice or other communication of any actual, alleged, or potential
infringement, misappropriation or unauthorized use of Intellectual Property
owned or used by any other person, except as provided on Schedule 3.11. To
the knowledge of Columbia, no person is infringing, misappropriating or
making any unauthorized use of any the Columbia Intellectual Property,
except as would not reasonably be expected to have a Material Adverse
Effect. Except as included or incorporated by reference in, or otherwise
referred to in the Columbia SEC Reports, neither Columbia nor any of its
Subsidiaries has entered into any agreement or arrangement, and neither
Columbia nor any of its Subsidiaries is subject to any judgment, order or
decree of any court or governmental or regulatory body limiting the ability
of Columbia or its Subsidiaries, as applicable, to exploit freely the
Columbia Intellectual Property or to transact business in any market with
any person, except as provided on Schedule 3.11. There is no pending or, to
the knowledge of Columbia, threatened action, claim, suit, proceeding or
investigation before any court or any governmental or regulatory body
challenging the validity, scope, ownership, or right to use the Columbia
Intellectual Property, except as provided on Schedule 3.11. There are no
actions, claims, suits or proceedings by Columbia or any of its
Subsidiaries against any other person regarding the Columbia Intellectual
Property or the Intellectual Property of such person. Columbia is not aware
of any Intellectual Property owned or controlled by any other person, or of
any facts, circumstances or events, that would materially impair or prevent
Columbia or its Subsidiaries from developing, commercializing,
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marketing, making and distributing the Product as contemplated by the
Columbia SEC Reports. "Intellectual Property" shall mean all: trade,
business and product names; trademarks; service marks; copyrights; patents;
inventions; discoveries; trade secrets; business and technical information;
proprietary compilations of data or information; know-how; formulas and
techniques; methods; regulatory filings and approvals; computer software;
all intellectual property rights, registrations, licenses and applications
pertaining to any of the foregoing; and all related documentation and
goodwill.
3.12 Compliance. Each of Columbia and its Subsidiaries has been and is in
compliance in all material respects with all applicable Laws in respect of
the conduct of its respective business, the ownership of its respective
properties and the Product, except where failure to so comply would not
reasonably be expected to have a Material Adverse Effect. Each of Columbia
and its Subsidiaries has all franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals necessary for
the conduct of its respective business as now being conducted unless the
failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
3.13 Taxes. Columbia has filed all federal, state, local and foreign income and
other tax returns required to be filed by it and has paid or accrued all
taxes shown as due thereon, except where failure to do so would not
reasonably be expected have a Material Adverse Effect, and Columbia has no
knowledge of a tax deficiency which has been or might be asserted or
threatened against it or any of its Subsidiaries that would reasonably be
expected to have a Material Adverse Effect.
3.14 Insurance. Columbia maintains insurance with sound and reputable insurance
companies of the types and in the amounts that Columbia reasonably believes
is adequate for its business, including, but not limited to, insurance
covering all real and personal property owned, licensed or leased by
Columbia and its Subsidiaries against all risks customarily insured against
by similarly situated companies, all of which insurance is in full force
and effect.
3.15 Employees. As of the date hereof, Columbia has no collective bargaining
arrangements or agreements covering any of its employees. As of the date
hereof, since January 1, 2001, no officer, consultant or key employee of
Columbia whose termination, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, has terminated
or, to the knowledge of Columbia, has any present intention of terminating
his or her employment or engagement with Columbia.
3.16 Debt. No Debt is outstanding or owed by Columbia except the Debt listed on
Schedule 3.16. Set forth on Schedule 3.16 is a list of all amounts of
outstanding Debt of Columbia for borrowed money and the maturity dates
thereof.
3.17 Liens. No Lien exists upon or with respect to any of Columbia's properties
or assets.
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3.18 FDA Matters. Columbia has (a) complied in all material respects with all
applicable Laws in its preparation and submission of the NDA for the
Product and in conducting the related clinical trials; and (b) not made to
the FDA any untrue statement of a material fact regarding the Product
(whether in any submission or otherwise) and not failed to disclose to the
FDA any material fact required to be disclosed to it by the FDA regarding
the Product.
3.19 Grant of Rights. Columbia has not granted any right to any Third Party
which would conflict with the rights granted under the Transaction
Agreements to PharmaBio or Innovex, as the case may be, nor entered into
any agreement which would impair its ability to perform its obligations
under the Transaction Agreements.
ARTICLE IV
Additional Covenants
4.1 Compliance with Certain Material Agreements. Columbia shall perform and
fulfill all of its obligations, and shall cause its Affiliates to perform
and fulfill all of their respective obligations under each of the
agreements listed on Schedule 3.8(b) as necessary to maintain Columbia's
and its Affiliates' respective rights in such agreements in full force and
effect in all material respects. Columbia shall provide written notice to
PharmaBio within five (5) Business Days of Columbia's or any of its
Affiliate's receipt of any notice from any other parties to any of the
agreements listed on Schedule 3.8(b) proposing or threatening to terminate
any such agreement.
4.2 Notice of Events of Default. Columbia agrees to provide prompt written
notice of the occurrence of any Adverse Marketing Event or any Event of
Default to PharmaBio but in any case not later than three Business Days
after any such event.
4.3 FDA Correspondence. Columbia agrees to promptly (and in any case not later
than three Business Days after receipt) provide to PharmaBio copies of
material correspondence to or from the FDA related to the Product
including, without limitation, any Not Approvable Letter or other FDA
action letters.
4.4 Diligence. Columbia agrees to exercise commercially reasonable efforts to
obtain FDA approval for and to launch the Product in the Territory.
4.5 Compliance. Columbia shall comply, and shall cause each of its Subsidiaries
to comply, in all material respects with all applicable Laws in respect of
the conduct of its respective business, the ownership of its respective
properties and the Product, except where failure to so comply would not
reasonably be expected to have a Material Adverse Effect. Columbia and its
Subsidiaries shall maintain in full force and effect all franchises,
permits, licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of their respective
business as now being conducted unless the failure to possess such
franchises, permits, licenses, consents and other
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governmental or regulatory authorizations and approvals, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
4.6 Grant of Rights. During the term of this Agreement, Columbia will not
grant, and shall ensure its Subsidiaries do not grant, any right to any
third party which would conflict with the rights granted to the PharmaBio
hereunder or enter into any agreement which would impair its ability to
perform its obligations under this Agreement.
4.7 Maintenance of Insurance. Columbia shall at all times maintain insurance in
full force and effect with sound and reputable insurance companies of the
types and in the amounts that Columbia reasonably believes is adequate for
its business, including, but not limited to, insurance covering all real
and personal property owned, licensed or leased by Columbia and its
Subsidiaries against all risks customarily insured against by similarly
situated companies.
4.8 Subscription Right.
(a) If at any time after the date hereof until the date on which PharmaBio
(which for purposes of this Section 4.8 shall include its Affiliates) shall
no longer own at least [***] of the shares of Columbia Common Stock
purchased by PharmaBio under the Stock Purchase Agreement by and between
PharmaBio and Columbia dated July 31, 2002, Columbia proposes to issue
equity securities of Columbia of any kind, the primary purpose of which is
to raise more than five million dollars ($5,000,000) in any six (6) month
period in equity capital (the term "equity securities" shall include for
these purposes any warrants, options or other rights to acquire equity
securities and debt securities convertible into equity securities), other
than (i) to the public in a firm commitment underwriting pursuant to a
registration statement filed under the Securities Act, (ii) in connection
with bona fide acquisitions, mergers, joint ventures or similar
transactions, the terms of which are approved by Columbia's Board of
Directors, (iii) pursuant to the Amended and Restated Common Stock Purchase
Agreement by and between Columbia and Acqua Wellington North American
Equities Fund, Ltd. effective as of February 6, 2001, or (iv) pursuant to
any stock option, stock purchase or similar plan or arrangement for the
benefit of the employees of Columbia or its Subsidiaries, adopted by the
Board of Directors, then, Columbia shall:
(i) give written notice to PharmaBio (no less than fifteen (15) days
prior to the closing of such issuance) setting forth in reasonable detail
(A) the material terms and provisions of the securities proposed to be
issued (the "Proposed Securities"), (B) the price and other terms of the
proposed sale of such securities; (C) the amount of such securities
proposed to be issued; and (D) such other information as PharmaBio may
reasonably request in order to evaluate the proposed issuance; and
(ii) offer to issue and sell to PharmaBio, on such terms as the
Proposed Securities are issued, upon full payment by PharmaBio, a portion
of the Proposed Securities equal to a percentage determined by dividing (A)
the number of shares of Common Stock of Columbia then held by PharmaBio, by
(B) the total number of shares
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of Common Stock then outstanding, including for purposes of this
calculation all shares of Common Stock issuable upon conversion or exercise
in full of any convertible or exercisable securities (other than employee
stock options) then outstanding (including shares of Common Stock issuable
upon conversion of convertible securities or issuable upon exercise of
outstanding warrants).
(b) PharmaBio must exercise its purchase rights hereunder within ten (10)
days after receipt of such notice from Columbia. The closing of the
exercise of such subscription right shall take place simultaneously with
the closing of the sale of the Proposed Securities giving rise to such
subscription right.
(c) Upon the expiration of the 10-day offering period described above,
Columbia will be free to sell such Proposed Securities that PharmaBio has
not elected to purchase during the ninety (90) days following such
expiration on terms and conditions no more favorable to the purchasers
thereof than those offered to PharmaBio. Any Proposed Securities offered or
sold by Columbia after such 90-day period must be reoffered to PharmaBio
pursuant to this Section 4.8. The election by PharmaBio not to exercise its
subscription rights under this Section 4.8 in any one instance shall not
affect its right as to any subsequent proposed issuance.
ARTICLE V
Confidentiality and Ownership of Information
5.1 Columbia on the one part and PharmaBio on the other part each acknowledges
that, in the course of discussions and negotiations leading to this
Agreement and performing its obligations hereunder, it has received or may
receive information from the other Party which is proprietary to the
disclosing Party and which the disclosing Party wishes to protect from
public disclosure ("Confidential Information"). Each receiving Party agrees
to retain in confidence, during the Royalty Term, and thereafter for a
period of five (5) years, all Confidential Information disclosed to it by
or on behalf of the other Party, and that it will not, without the written
consent of such other Party, use Confidential Information for any purpose
other than the purposes indicated herein or disclose such information to a
third party. These restrictions shall not apply to Confidential Information
which: (i) is or becomes public knowledge (through no fault of the
receiving Party); (ii) is made lawfully available to the receiving Party by
an independent third party that, to the knowledge of the receiving Party,
is under no duty of confidentiality to the disclosing Party; (iii) is
already in the receiving Party's possession at the time of receipt from the
disclosing Party (and such prior possession can be demonstrated by
competent evidence by the receiving Party); (iv) is independently developed
by the receiving Party and/or Affiliates (and such independent development
can be demonstrated by competent evidence by the receiving Party); or (v)
is required by Law to be disclosed by the receiving Party, provided,
however, if reasonably possible, such receiving Party gives the disclosing
Party sufficient advance written notice to permit it to seek a protective
order or other similar order with respect to such Confidential Information
and, thereafter, the receiving Party may disclose only the minimum
Confidential Information required to be
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disclosed in order to comply with such and only to the government authority
or agency or in the proceeding which is the subject of such order.
5.2 PharmaBio on the one hand and Columbia on the other hand shall limit
disclosure of the other Party's Confidential Information to only those of
their respective officers, representatives, agents and employees who are
directly concerned with the performance of this Agreement and have a
legitimate need to know such Confidential Information in the performance of
their duties and shall ensure that their respective officers,
representatives, agents and employees to whom Confidential Information is
disclosed do not further disclose such Confidential Information to any
third party except as otherwise permitted hereunder.
5.3 All Columbia inventions, processes, know-how, patents, trade secrets,
copyrights, trade names, trademarks, service marks, marketing materials,
proprietary materials or other intellectual property of any kind, and all
improvements to any of the foregoing (collectively, "Columbia Property"),
disclosed, used, improved, modified or developed in connection with the
relationship contemplated by this Agreement shall remain the sole and
exclusive property of Columbia.
5.4 Columbia acknowledges that PharmaBio (and its Affiliates) possess certain
inventions, processes, know-how, trade secrets, improvements, other
intellectual properties and other assets, including but not limited to
analytical methods, procedures and techniques, computer technical expertise
and software, and business practices, which have been independently
developed by PharmaBio and/or its Affiliates (collectively "PharmaBio
Property"). Any PharmaBio Property or improvements thereto which are
disclosed, used, improved, modified or developed under or during the term
of this Agreement shall remain the sole and exclusive property of PharmaBio
or the respective Affiliate.
5.5 Neither PharmaBio nor Columbia or any of their Affiliates shall make any
public announcements regarding this Agreement or the terms and conditions
thereof without the prior written approval of the other Party, which
approval shall not be unreasonably withheld or delayed, except to the
extent such disclosure is required by Law.
ARTICLE VI
Grant of Certain Preferred Rights by Columbia to PharmaBio
For so long as Innovex is providing services related to the Product under the
Master Services Agreement or any replacement agreement, Columbia hereby grants
to PharmaBio (which for purposes of this Article VI shall mean and include its
Affiliates) a preferred provider relationship whereby PharmaBio shall have a
first and preferred opportunity to negotiate for a period of [***] with Columbia
(which for purposes of this Article VI shall mean and include its Affiliates) to
provide to Columbia any services which PharmaBio provides to customers, which
Columbia has decided to outsource or otherwise engage a service provider to
perform during the Royalty Term, and which involve payments individually or in
the aggregate of $500,000 or more, including without limitation clinical and
pre-clinical development, coordination and execution services,
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sales and marketing services, commercialization services, and similar services.
Columbia shall allow and grant PharmaBio the right to provide such services if
PharmaBio agrees to provide such services on competitive terms and conditions.
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ARTICLE VII
Independent Contractor Relationship
For the purposes of this Agreement, Columbia and PharmaBio are independent
contractors and nothing contained in this Agreement shall be construed to place
them in the relationship of partners, principal and agent, employer and employee
or joint venturers. Neither Columbia nor PharmaBio shall have the power or right
to bind or obligate the other Party, nor shall either Party hold itself out as
having such authority.
ARTICLE VIII
Additional Termination Provisions
8.1 Columbia may terminate this Agreement for material breach upon sixty (60)
days written notice specifying the nature of the breach, if such breach (i)
has not been substantially cured within the sixty (60) day period or (ii)
is not curable within such 60-day period and the breaching Party has not
commenced and diligently continued during such 60-day period reasonable
actions to cure such breach. During the 60-day cure period for termination
due to breach, each Party will continue to perform its obligations under
this Agreement. Any termination under this Section 8.1 shall be without
prejudice to any claims for damages or other relief by Columbia.
8.2 This Agreement shall terminate upon the payment by Columbia to PharmaBio of
either (i) the Maximum Royalty Amount or (ii) the applicable Termination
Amount.
ARTICLE IX
Indemnification and Liability Limits
9.1 PharmaBio shall indemnify, defend and hold harmless Columbia, its
Affiliates and its and their respective directors, officers, employees and
agents from and against any and all losses, claims, actions, damages,
liabilities, penalties, costs and expenses (including reasonable attorneys'
fees and court costs) (collectively, "Losses"), resulting from any: (i)
breach by PharmaBio (or its employees) of its obligations hereunder; (ii)
willful misconduct or grossly negligent acts or omissions of PharmaBio or
its employees; and (iii) violation by PharmaBio or its employees of any
Laws applicable to the performance of PharmaBio's obligations under this
Agreement; except, in each case, to the extent such Losses are determined
to have resulted from the gross negligence or willful misconduct of
Columbia or its employees.
9.2 Columbia shall indemnify, defend and hold harmless PharmaBio, its
Affiliates and its and their respective directors, officers, employees and
agents from and against any and all Losses resulting from any: (i) third
party claim arising from the manufacture, storage, handling, packaging,
labeling, production, transportation, distribution, marketing, testing,
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use, sale or other disposition of the Product; (ii) breach by Columbia (or
its employees) of its obligations hereunder; (iii) willful misconduct or
grossly negligent acts or omissions of Columbia or its employees; and (iv)
violation by Columbia or its employees of any Laws applicable to the
performance of Columbia' obligations under this Agreement; except, in each
case, to the extent such Losses are determined to have resulted from the
gross negligence or willful misconduct of PharmaBio or its employees.
9.3 In the event of a third party claim or lawsuit, the Party seeking
indemnification hereunder (the "Indemnified Party") shall give the Party
obligated to indemnify (the "Indemnifying Party") prompt written notice of
any claim or lawsuit (including a copy thereof), provided that the failure
of an Indemnified Party to notify the Indemnifying Party on a timely basis
will not relieve the Indemnifying Party of any liability that it may have
to the Indemnified Party unless the Indemnifying Party demonstrates that
the defense of such action is materially prejudiced by the Indemnified
Party's failure to give such notice. The Indemnified Party and its
employees shall fully cooperate with Indemnifying Party and its legal
representatives in the investigation and defense of any matter the subject
of indemnification, which defense shall be managed by the Indemnifying
Party in a manner, including the selection of legal counsel, reasonably
acceptable to the Indemnified Party. The Indemnified Party shall not
unreasonably withhold its approval of the settlement of any such claim,
liability, or action by Indemnifying Party covered by this indemnification
provision; provided that such settlement does not include an admission or
acknowledgement of liability or fault of the Indemnified Party.
9.4 Neither PharmaBio nor Columbia, nor any of such Party's Affiliates,
directors, officers, employees, subcontractors or agents shall have, under
any legal theory (including, but not limited to, contract, negligence and
tort liability), any liability to any other Party hereto for any loss of
profits, opportunity or goodwill, or any type of special, incidental,
indirect or consequential damage or loss, in connection with or arising out
of this Agreement. For the avoidance of doubt, a claim by PharmaBio for
royalties on Net Sales payable by Columbia hereunder or a claim by Columbia
for payments pursuant to Section 2.1 shall not be limited in any way
pursuant to the provisions set forth in the preceding sentence.
ARTICLE X
Notices
Any notice required to be given by either Party shall be in writing. All notices
shall be to the Parties and addresses listed below, and shall be deemed
sufficiently given (i) when received, if delivered personally or sent by
facsimile transmission with confirmed receipt, or (ii) one Business Day after
the date mailed by first class mail or sent by an internationally recognized
overnight delivery service with charges prepaid.
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If to PharmaBio: PharmaBio Development Inc.
4709 Creekstone Drive
Suite 200, Riverbirch Building
Durham, NC 27703
Attention: President
Fax: 919-998-2090
With a copy to: PharmaBio Development Inc.
4709 Creekstone Drive
Suite 200, Riverbirch Building
Durham, NC 27703
Attention: General Counsel
Fax: 919-998-2090
If to Columbia: Columbia Laboratories, Inc.
354 Eisenhower Parkway
Livingston, NJ 07039
Attention: President
Fax 973-994-3001
With a copy to: Columbia Laboratories, Inc.
354 Eisenhower Parkway
Livingston, NJ 07039
Attention: General Counsel
Fax 973-994-3001
ARTICLE XI
Assignment
No Party may assign any of its rights or obligations under this Agreement to any
third party other than an Affiliate without the written consent of the other
Party, which consent shall not be unreasonably withheld or delayed, but no such
assignment shall relieve the assigning Party of any of its obligations
hereunder. Any permitted assignee of rights or obligations hereunder shall, in a
writing to the other Party, expressly assume performance of such rights or
obligations. Nothing in this Article XI shall preclude the transfer of a Party's
rights and obligations under this Agreement in conjunction with a merger in
which such Party is not the surviving entity. Any attempted assignment in
violation of this Section shall be null and void.
ARTICLE XII
General Provisions
12.1 Sections 2.1, 2.2, 2.3 and 2.6 and Articles V, IX, XI, XII and XIII shall
survive the termination of this Agreement for any reason.
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12.2 This Agreement contains the entire understanding of the Parties with
respect to the subject matter herein and cancels all previous agreements
(oral and written), negotiations and discussions dealing with the same
subject matter. The Parties, from time to time during the term of this
Agreement, may modify any of the provisions hereof only by an instrument in
writing duly executed by the Parties.
12.3 No failure or delay on the part of a Party in either exercising or
enforcing any right under this Agreement will operate as a waiver of, or
impair, any such right. No single or partial exercise or enforcement of any
such right will preclude any other or further exercise or enforcement
thereof or the exercise or enforcement of any other right. No waiver of any
such right will have effect unless given in a signed writing. No waiver of
any such right will be deemed a waiver of any other right. The rights and
remedies set forth in this Agreement are cumulative and not exclusive of
any rights or remedies provided by Law or otherwise. Termination of this
Agreement by a Party shall not affect any other rights or remedies which
may be available to such Party against a defaulting Party.
12.4 If any part or parts of this Agreement are held to be illegal, void or
ineffective, the remaining portions of this Agreement shall remain in full
force and effect. If any of the terms or provisions are in conflict with
any applicable Laws, then such term(s) or provision(s) shall be deemed
inoperative to the extent that they may conflict therewith, and shall be
deemed to be modified or conformed with such Laws. In the event of any
ambiguity respecting any term or terms hereof, the Parties agree to
construe and interpret such ambiguity in good faith in such a way as is
appropriate to ensure its enforceability and viability.
12.5 The headings contained in this Agreement are used only as a matter of
convenience, and in no way define, limit, construe or describe the scope or
intent of any section of this Agreement.
12.6 Each Party represents and warrants to the other that the individual signing
below for such Party is authorized and empowered to bind such Party to the
terms of this Agreement.
12.7 Neither Party shall be liable to the other for delay or failure in the
performance of the obligations on its part contained in this Agreement
(other than payment obligations) if and to the extent that such failure or
deal is due to circumstances beyond its control ("Force Majeure") which it
could not have avoided by the exercise of reasonable diligence including
but not limited to: act of God; war or insurrection; civil commotion;
destruction of essential facilities or materials by earthquake, fire, flood
or storm; labor disturbance (whether or not any such labor disturbance is
within the power of the affected Party to settle); epidemic; or other
similar event; provided, however, that the Party so affected shall notify
the other Party promptly should such circumstances arise, giving an
indication of the likely extent and duration thereof, and shall use all
commercially reasonable efforts to avoid, remove or alleviate such causes
of non-performance and shall resume performance of its obligations
hereunder with the utmost dispatch whenever such causes are removed. In the
event of Force Majeure lasting more than three (3) months,
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the Parties agree to meet and discuss how this Agreement can be justly and
fairly implemented under the circumstances.
12.8 Each party shall, without further consideration, take such further action
and execute and deliver such further documents as may be reasonably
requested by the other party in order to carry out the provisions and
purposes of this Agreement.
12.9 This Agreement and any amendment hereto may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all
of which counterparts taken together shall constitute but one and the same
instrument. The execution of this Agreement and any such amendment by any
party hereto will not become effective until counterparts hereof have been
executed by both parties hereto. This Agreement may be executed by either
party by delivery of such party's facsimile signature thereon.
12.10 The parties intend and agree that PharmaBio's payments under Section 2.1
of this Agreement (i) shall not be an equity investment in Columbia; (ii)
shall not give PharmaBio any rights or interest in the capital stock of
Columbia; and (iii) shall not entitle PharmaBio to any rights of a
stockholder of Columbia.
ARTICLE XIII
Dispute Resolution
13.1 Governing Law. This Agreement, including, without limitation, the
interpretation, performance, enforcement, breach or termination thereof and
any remedies relating thereto, shall be governed by and construed in
accordance with the Laws of the State of Delaware, United States of
America, as applied to agreements executed and performed entirely in the
State of Delaware, without regard to conflicts of law rules.
13.2 Internal Review. In the event that a dispute, difference, claim, action,
demand, request, investigation, controversy, threat, or request for
testimony or information or other question arises pertaining to any matters
which arise under, out of, in connection with, or in relation to this
Agreement (a "Dispute") and either Party so requests in writing, prior to
the initiation of any formal legal action, the Dispute will be submitted to
the Chief Executive Officers of Columbia and PharmaBio. For all Disputes
referred to the Chief Executive Officers, the Chief Executive Officers
shall use their good faith efforts to meet at least two times in person and
to resolve the Dispute within ten (10) days after such referral.
13.3 Arbitration.
(a) If the Parties are unable to resolve any Dispute under Section 13.2,
then either Party may by election within ten (10) days after the end
of the period set forth in Section 13.2, require the matter to be
settled by final and binding arbitration by sending written notice of
such election to the other Party clearly marked "Arbitration Demand".
Thereupon such Dispute shall be arbitrated in accordance
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with the terms and conditions of this Section 13.3. Notwithstanding
the foregoing, either Party may apply to a court of competent
jurisdiction for a temporary restraining order, a preliminary
injunction, or other equitable relief to preserve the status quo or
prevent irreparable harm.
(b) The arbitration panel will be composed of three arbitrators, one of
whom will be chosen by Columbia, one by PharmaBio, and the third by
the two so chosen. If both or either of Columbia or PharmaBio fails to
choose an arbitrator or arbitrators within fourteen (14) days after
receiving notice of commencement of arbitration, or if the two
arbitrators fail to choose a third arbitrator within fourteen (14)
days after their appointment, the American Arbitration Association
shall, upon the request of both or either of the Parties to the
arbitration, appoint the arbitrator or arbitrators required to
complete the panel. The arbitrators shall have reasonable experience
in the matter under dispute. The decision of the arbitrators shall be
final and binding on the Parties, and specific performance giving
effect to the decision of the arbitrators may be ordered by any court
of competent jurisdiction.
(c) Nothing contained herein shall operate to prevent either Party from
asserting counterclaim(s) in any arbitration commenced in accordance
with this agreement, and any such Party need not comply with the
procedural provisions of this Section 13.3 in order to assert such
counterclaim(s).
(d) The arbitration shall be filed with the office of the American
Arbitration Association ("AAA") located in Delaware or such other AAA
office as the Parties may agree upon (without any obligation to so
agree). The arbitration shall be conducted pursuant to the Commercial
Arbitration Rules of AAA as in effect at the time of the arbitration
hearing, such arbitration to be completed in a sixty (60) day period.
In addition, the following rules and procedures shall apply to the
arbitration:
(i) The arbitrators shall have the sole authority to decide
whether or not any Dispute between the Parties is arbitrable
and whether the Party presenting the issues to be arbitrated
has satisfied the conditions precedent to such Party's right
to commence arbitration as required by this Section 13.3.
(ii) The decision of the arbitrators, which shall be in writing
and state the findings the facts and conclusions of law upon
which the decision is based, shall be final and binding upon
the Parties, who shall forthwith comply after receipt
thereof. Judgment upon the award rendered by the arbitrator
may be entered by any competent court. Each Party submits
itself to the jurisdiction of any such court, but only for
the entry and enforcement to judgment with respect to the
decision of the arbitrators hereunder.
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(iii) The arbitrators shall have the power to grant all legal and
equitable remedies (including, without limitation, specific
performance) and award compensatory damages provided by
applicable Law, but shall not have the power or authority to
award punitive damages. No Party shall seek punitive damages
in relation to any matter under, arising out of, or in
connection with or relating to this Agreement in any other
forum.
(iv) The Parties shall bear their own costs in preparing for and
participating in the resolution of any Dispute pursuant to
this Section 13.3, and the costs of the arbitrator(s) shall
be equally divided between the Parties; provided, however,
that each Party shall bear the costs incurred in connection
with any Dispute brought by such Party that the arbitrators
determine to have been brought in bad faith.
[signature page follows]
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[signature page to Striant Investment and Royalty Agreement]
IN WITNESS WHEREOF, this Agreement has been executed by the Parties hereto
through their duly authorized officers as of the date first set forth above.
PHARMABIO DEVELOPMENT INC. COLUMBIA LABORATORIES, INC.
By: /S/ William D. Robb By: /S/ Fred Wilkinson
---------------------------------- -------------------------------
Name: William D. Robb Name: Fred Wilkinson
Title: Vice President, PharmaBio Title: President & CEO
Development, Inc.
SCHEDULES
Schedule Description
3.5 Subsidiaries
3.8(a) Material Agreements; Required to Be Filed with SEC
3.8(b) Material Agreements; Material Contracts Related to the Product
3.11 No Litigation or Other Actions; Properties (Other than Intellectual
Property); Intellectual Property
3.16 Debt
Schedule 3.5
Subsidiaries
Subsidiaries of Columbia Laboratories, Inc., (all of which are wholly-owned)
are:
Columbia Laboratories (Bermuda) Ltd. Incorporated in Bermuda
Columbia Laboratories (France) SA Incorporated in France
Columbia Laboratories (UK) Limited Incorporated in the United Kingdom
Columbia Research Laboratories, Inc. Incorporated in Delaware
Schedule 3.8(a)
Material Agreements Not Yet Filed With SEC
1. License and Supply Agreement between Ardana Bioscience Limited, Columbia
Laboratories (Bermuda), Ltd., and Columbia Laboratories, Inc., dated as of
October 16, 2002.
2. Development and License Agreement between Ardana Bioscience Limited,
Columbia Laboratories (Bermuda), Ltd., and Columbia Laboratories, Inc.,
dated as of December 26, 2002.
3. The Transaction Agreements.
Schedule 3.8(b)
Material Agreements Related to the Product
1. Semi-exclusive Supply Agreement by and between Mipharm S.p.A., and Columbia
Laboratories (Bermuda) Limited, dated as of May 7, 2002.
2. License and Supply Agreement between Ardana Bioscience Limited, Columbia
Laboratories (Bermuda), Ltd., and Columbia Laboratories, Inc., dated as of
October 16, 2002.
3. The Transaction Agreements.
Schedule 3.11
Intellectual Property
Product Intellectual Property:
1. U.S. Patent No. 4,615,697
2. U.S. Patent No. 6,248,358
3. U.S. Patent Application Serial No. 09/596,073
4. U.S. Patent Application Serial No. 09/877,218
5. U.S. Trademark Application No. 76,442,855 for "Striant"
6. U.S. Trademark Registrations - None
Interferences and Other Matters:
1. [***]
2. The Joint United Nations Program on HIV/AIDS (UNAIDS) issued a study report
on June 13, 2000, that nonoxynol-9 in a gel form is not effective in
protecting women from HIV infection. The gel form used in the study was the
Company's Advantage-S product. The study results may affect the value of
the Company's U.S. Patent No. 5,667,492, and related international patents
and applications.
Schedule 3.16
Debt
7.125% Convertible Subordinated Note Due March 15, 2005.
Payable to SBC Warburg Dillon Read Inc. $10,000,000
Note to Ares Trading SA payable in monthly installments
of $220,000 plus interest at 9% on the average balance
outstanding during the month 146,667
-----------
$10,146,667